Posted on 05/14/2010 10:35:28 AM PDT by mlocher
NEW YORK (Reuters) - A big mystery seller of futures contracts during the market meltdown last week was not a hedge fund or a high frequency trader as many have suspected, but money manager Waddell & Reed Financial Inc, according to a document obtained by Reuters.
Waddell sold on May 6 a large order of e-mini contracts during a 20-minute span in which U.S. equity markets plunged, briefly wiping out nearly $1 trillion in market capital, the internal document from CME Group Inc said.
The e-minis are one of the most liquid futures contracts in the world, providing holders exposure to the benchmark Standard & Poors 500 Index. The contracts can act as a directional indicator for the underlying stock index.
Regulators and exchange officials quickly focused on Waddell's sale of 75,000 e-mini contracts, which the document said "superficially appeared to be anomalous activity."
Gary Gensler, chairman of the Commodity Futures Trading Commission, said in congressional testimony on Tuesday that it had found one sale was responsible for about 9 percent of the volume in e-minis during the sell-off in the U.S. markets.
Gensler said there was no suggestion that the trader, who he did not identify, did anything wrong in only entering orders to sell. Gensler said data shows that the trades appeared to be a bona fide hedging strategy.
The CME document shows that during the sell-off and subsequent rally, other active traders in e-minis included Jump Trading, Goldman Sachs, Interactive Brokers, JPMorgan Chase and Citadel Group.
(Excerpt) Read more at news.fidelity.com ...
It sucks to be them today. Goldman-Sachs and Morgan Stanley are breathing a sigh of relief.
Wow. My wife used to work for Waddell. I bet she’s glad she doesn’t now!
Having said that, this is the second time in just a couple of mionths that I've become aware of a huge market fluctuation that nobody saw coming, didn't know what to do, and during a window of opportunity opened that could have killed the US economy unless some 'faithful, patriotic watchdog' of some sort put the kibosh on the 'run', a lot of money was made/stolen/hustled from sincere and otherwise hinest investors
If this is true .. has it always been happening or is it a relatively new phenomenom?
Even if this was the initial trigger, It still was the high frequency computers With there sell levels pre-set that caused it all to escalate. It had to be for everything to react as fast as it did. They are covering that up.
I’m not seeing why what they did was wrong.
They sold stuff. You’re allowed to do that on the stock market. What am I missing?
Who is that?
If you use other people’s money (clients), to be used as pawns to further the firm’s position....
Clearly a conflict of interest, and violates the exchange rules, and is pure fraud in its most simple terms.
There, does that help you understand the situation?
::Bangs head against keyboard in frustration::
IT'S WADDELL!!! Who'd you think it was???
I find it incredibly concerning, that after 2002, 2008/2009, that where we stand today, corruption is actually getting worse. Muni insurers, ratings agencies, institutional traders, mega finance firms, hedge funds.... of all those corrupt entities, you see anyone paying the price for the corruption and fraud they are responsible for? In the absence of justice or punishment, the situation is getting worse and worse. Frankly, it is frightening to me, and I’m an 18 year veteran of this business.
He looks to old to be Waddell,)
Really? I would like English to be the official language, especially when they are speaking English!
bttt
Excellent picture!
Even if this was the initial trigger, It still was the high frequency computers With there sell levels pre-set that caused it all to escalate. It had to be for everything to react as fast as it did. They are covering that up.>>>>>>>>>
I say the same and Waddel won’t be punished because they did nothing wrong. They did something ordinary and normal.
He may have been retarded or autistic.
One of the greatest characters in the history of the game.
I didn’t see anything about fraud in the article, though I guess there are other articles about this. I can check, no need for you to do my homework for me :0)
But in case you have time to answer: they spent others people money - I get that, that’s their job as money managers. Is it the case that they materially damaged their client’s positions in order to improve separate positions of their own? E.g. did they immediately buy the sold-off positions in their own name/through an intermediary?
If they simply sold off their client’s positions because they thought the market was going to crash, I can see where they were coming from. Because on the day in question the SP500 was over 2% down, a real change from its worse-day behaviors for the last few months, and the Euro was going into a tailspin. A responsible money manager would have been wise to sell off. Surely Waddell’s aren’t being punished for being the first in the queue for the lifeboat?
Most people are buy and hold investors. They will see no impact because of this "blip." If this story is true, then there should be no concern for most investors. Unfortunately, I expect our government to want to put more restrictions and regulations on investors, and given the current administration, they will not be good.
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